The Weekly Rap! Friday July 20, 2012

The Dow is currently trading at 12,943 up 208 pts over last week The S&P 500 is higher as well by 23 pts at 1,376.   Gold is trading at $1,582 an ounce, while oil futures at $92.12 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.41/Gal.

Yields on 10-year notes, which move inversely to prices, are trading at 1.49%.  30-year bond yields are trading at 2.59%.  Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.96, amazingly holding these levels all week.  It’s a great time to lock in a rate if you can, while we’ve through the top of the current range (104 to 105) if we can’t sustain higher levels we will likely correct to the middle of the range.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; U.S. retail sales fell 0.5%in June for the third straight month as consumers cut spending on most goods and services, reflecting a sharp slowdown in economic growth in the second quarter.  The last time the U.S. experienced three straight monthly drops in retail spending was in the second half of 2008. Without stronger retail sales, the economy can’t expand faster and dramatically lower the nation’s high 8.2% unemployment rate. Retail spending accounts for more than two-thirds of our economic growth.

Consumer prices or inflation, flattened out in June as declining energy costs offset an increase in the price of meat, vegetables and other foods.  Excluding food and gas, core consumer prices rose 0.2% in June.  Lower inflation gives the Fed more room to adopt additional measures to boost the economy. Consumer prices have eased considerably as the spike in energy costs earlier in the year unwinds.

Home-builder sentiment in July is higher, the most in close to a decade to bring the level to the highest point since the recession. Builder confidence for newly built, single-family homes climbed 6 points to 35, the highest level since March 2007. The index is designed so that a reading of 50 is considered to be good, which hasn’t been the case since April 2006.  Housing starts rose 6.9% to an annual rate of 760,000 last month from 711,000 in May.

On the national level, sales of existing homes fell in June to the slowest pace since October, a decline that goes against the grain of more positive indicators from the housing market.  There are millions of homes either still tied up in the legal process surrounding foreclosure or which at some stage will likely be in foreclosure (mortgage delinquencies, while declining, are still very high), and these units are not yet recorded as available for sale.  We know inventories are down, my guess is that while many people might like to sell many are under water or would have to short sell and that’s keeping them from listing.

In testimony to the Senate Banking Committee Fed Chief Bernanke sketched out for members of Congress the weaker economic outlook and stressed that the central bank was prepared to take further action to try to give the recovery a jolt. Bernanke said that the reduction in the unemployment rate will likely be “frustratingly slow.”  The Fed pushed rates down to a range between 0% and 0.25% in December 2008 and since then has had to rely on extraordinary steps to help the economy. The Fed’s balance sheet consists of nearly $3 trillion in Treasurys and housing-related assets as the central bank has bought securities to try to lower long-term interest rates.  At the moment, the Fed says it is likely to keep rates extraordinarily low until late 2014.

And now for the Rant:  Siri, can I text while driving in California?  Not yet, but starting next year it will be legal – as long as you don’t touch your phone.  And there’s where it gets fuzzy.  I recently upgraded to an iPhone 4s mostly because of Siri.  I hate texting personally.  My thumbs are too big and it takes me longer to complete a conversation than if I’m talking.  Call me old- school.  I like the fact that I can use my Bluetooth and tell Siri to text or read a text without taking my eyes off the road.

Starting Jan. 1, a new revision to the texting law (which I wholly support) will allow you to send, dictate and listen to text message while driving, but only if you’re using a separate, voice-activated device that’s connected to your phone – something like a headset or Bluetooth earpiece or a program inside your car like OnStar.  Just turn on the device, say “text mom” and talk out the message.

But the “grey area” here seems to be what constitutes “hands free.”   The CHP says that just the act of turning on the phone or selecting the phone’s hands-free text app, like pushing the Siri button or Google apps on Android phones, is enough to warrant flashing lights in your rear-view mirror and a $100-plus ticket. Same thing goes for using your phone to read texts.

Apparently your phone is off limits, don’t touch it.  But it’s legal to touch fancy digital stuff in your car including the radio and GPS devise and behind your ear that connect to your phone – and apps like Siri – to talk and soon text by voice.  Apparently there’s an App called “Hands-free Control” that when you say a keyword like “Siri” it will activate.  When I find it I will pass it along.  This is my reality show!  It’s my opinion and I’m sticking to it!

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Bill

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